ED MONK: Green savings from 'smart' meters may or may not arrive - but accurate bills could be an even bigger prize

Imagine that instead of paying for your weekly shop at the supermarket checkout, you walked out of the store without paying anything and then took a guess at how much you spent on average and paid that direct from your bank account each month.

You might build huge debts, or credits, with the supermarket over months or even years as you over or underspent, and these would have to be corrected in large, one-off payments that can be called in a short notice.

The potential for huge errors to build up is obvious, which is why it would be a silly way to buy your fruit and veg.

Smart Elec: The Government is selling its smart meter plan on it the savings households will make.

Yet this is how millions of us pay for another of our essential bills, gas and electricity, and with exactly these consequences.

We report this week that complaints about energy companies are at record levels and growing. Gripes are mostly about inaccurate bills and the torture of dealing with customer service departments to put them right.

The comparison with supermarkets is only so useful, of course. You can't normally buy energy before you use it (where would you put it?) and the infrastructure needed to supply your gas and electricity needs to be in place and maintained the whole time, and needs to be paid for the whole time. It's a very different business.

But it is no coincidence that the supermarkets, whose customers know exactly how much they spend and cross the road to a rival if they don't get a good deal, compete fiercely with one another while the energy suppliers, whose customers sleepwalk for months paying an amount only loosely connected to the actual cost, do not.

Regulators have been trying for years to understand why we don't switch supplier more given the savings to be made, particularly for those who have never switched. The Competition and Markets Authority is at last examining this apparent failure in the market.

The fact that households rarely see and feel the cost of their energy directly is surely part of the explanation. Not to mention the substantial barrier to switching that is created when someone has a large debt to their supplier that they must clear before they can leave.

Enter smart meters - the electronic boxes fitted in homes that promise to tell you exactly how much you are spending and generate bills that reflect exactly your use. In a smart metered world, your energy bill will be as accurate as your mobile phone bill - no more estimates, no more shock debts.

I first started writing about smart meters in 2007. Back then they were the future and seven years on, they still are.

How it works: This diagram explains how the new smart meters will work.

Up to now, the devices have been discussed among interested industry watchers and few others, but that is about to change. A plan is now in motion that eventually see smart meters installed in every home, and opponents to it are queuing up.

There have also been questions about the reliability of the technology and its suitability for different types of homes.

But most concern surrounds the cost, and who pays it. The Department of Energy and Climate Change admits the plan will eventually cost £11billion, including £200 for each box and its installation.

This will be met by the large suppliers, which will then pass the cost onto households through higher bills. That means we all pay.

The Department for Energy and Climate Change has argued its case on energy-saving grounds - that families will save £18.5billion over twenty years, mostly because they will be nudged to cut their energy use when they can see exactly what it is costing them.

This sounds vague and implausible and has predictably attracted the ire of the anti-green lobby, which has already branded the plan an EU-driven sop to the eco-mentalists.

It would've been much better to argue that accurate and up-to-date bills are essential if we want to finally get this market to work properly. Smart meters should provide this.

The set-up costs of such as system will always be large, but so could be the rewards. Who knows, maybe one day you will be able to switch supplier instantly through your smart meter at the touch of a button. British Gas is the cheapest right now, let's go with them, but if nPower cuts prices for the winter, we'll switch back, and it's instant.

Energy companies simply do not face that pressure to compete at the moment.

Instead of allowing the suppliers to argue that this is an imposed cost that they have no choice to pass on in full, the Government and its regulators should tell these giant companies that billing people properly is an essential cost of their business that they must absorb as they do any other investment.

Perhaps imposing a rule that anyone undercharged for their energy would not have to pay the
difference, while those overcharged get their money back at a punitive
rate of interest, would provide motivation for the suppliers to get
bills right.

The cost of smart meters, or any other system to make bills more accurate, will inevitably be passed on but, if they make the market work properly, companies will have to keep this cost as low as possible or see customers walk away to a cheaper rival.